5 Ways Longevity Is Changing Retirement Planning (And What to Do About It)

There's no doubt about it: People are living longer and need more money to support their extended life spans. In the U.S. alone, the average life expectancy has reached the mid-80s for people turning 65 today, though it's not unusual for someone to live well into their 100s.

Longer life spans should be a reason to rejoice — after all, it means additional memories and experiences that come with having more time on earth. However, living longer also brings legitimate concerns about saving enough money to support such a long stay.

If you're uncertain that you'll have enough money to enjoy a retirement of 30 or 40 years, you should start planning now. Take a look at how living longer could affect your retirement income and what you can do to prepare for it.

1. You need to save more money

Much of the financial advice for retirement hasn't considered a retirement period that could last 30 or 40 years. If people aren't advised to save enough during their career, they'll likely have a smaller nest egg that will be depleted much faster. In the case of a long life span, saving the typical 10 to 15 percent of income traditionally recommended for retirement probably won't be enough.

You should consider working with a financial planner to discuss the prospects of a longer retirement. Get solid numbers on your potential cost of living to cover various scenarios. Calculate what you could need 20, 30, and even 40 years after you leave the working world, and figure out the amount of money you should be saving to cover those scenarios. (See also: How to Face These 7 Scary Facts About Retirement Saving)

2. Your investments may need longer exposure to risk

There are a couple of ways your investing strategy may change with a longer life span. For one, you may find yourself using catch-up contributions and may opt to max out every retirement vehicle you can as early as your 40s and 50s.

Then, there's the idea of allocation and risk. Morgan Ranstrom, CFA of Trailhead Planners, says that moving away from equities into bonds may no longer be a good strategy. "It may be necessary to maintain more stock and/or risk exposure in a retiree's investment portfolio to reduce the risk of outliving their money," he says.

An investment adviser can help you create a reasonable asset allocation plan that considers a longer retirement period. Make sure you have a rebalancing plan for each stage of your life, from pre-retirement through 20 or 30 years post-retirement. Seeing these scenarios, with possible outcomes, will give you an idea of how to adjust your investment strategy both now and later on in life. (See also: 7 Reasons to Invest in Stocks Past Age 50)

3. You'll need more insurance

Michael Dinich, professional estate and tax planner, points out that, "Many universal life policies were funded at a level that would only guarantee coverage until mid-80s." Extending policies for older retirees can be extremely costly, leaving people without coverage when they need it most.

In addition to life insurance, longer life spans could increase the need for long term care insurance. This type of insurance can help cover nursing home costs. Getting this insurance in your 50s or 60s can be expensive, but it will be significantly cheaper than if you wait until you're older. (See also: The Best Age to Buy Long-Term Care Insurance)

Check your existing insurance policies to find additional products that may cover your needs. For example, some policies can be converted partially or completely once the term expires so they last longer. There may also be hybrid products that cover a combination of life, burial, and long term care. The key is to check into these options early to prevent being ineligible at an older age.

4. You may need to work longer

Living longer means you may need to keep working longer to continue growing your retirement savings. Kevin Langman, financial planner at Finovo, says he sees clients with a more fluid concept of their working careers. "Instead of working to a set date and stopping," he explains, "we see careers going through stages, with a few decades of full-time work followed by a shift to more part-time and passion-fueled work."

Just because you may need to work later in life doesn't mean it has to be stressful or you have to languish in a job you dislike. Investigate ways to extend your career in a way you don't dread — maybe turn a passion or hobby into a side gig. Langman encourages his entrepreneurial clients to explore residual income options like, "products and services that can continue to generate income even once they are not working on them full-time anymore." (See also: 6 Great Retirement Jobs)

5. You'll need to account for inflation

Brian Saranovitz, of Your Retirement Advisor, says that planning for inflation can be tricky such a long way out. He says, "In some cases, retirees will need to create an inflation-adjusted retirement income for 25, 35, or possibly more years." With such a far-out horizon, it can be hard to pinpoint exactly how much inflation will affect an asset base.

Work closely with your retirement planner or investment adviser to control the effects of not only inflation, but other forces that can erode assets quickly like taxes and market volatility. Some options include exploring alternative investments and insurance products to increase the effectiveness of your portfolio. (See also: 4 Ways to Protect Your Retirement From Inflation)

Roger Whitney has been a financial adviser for 27 years. He sums up the idea of a longer retirement in this way: "Traditional retirement planning worked for our parents. They lived retirement on the park bench of life. The modern retiree will likely live longer, be more active, and spend more in retirement. They'll still be on the playground."

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